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Tuesday, 5 January 2016

Market Overview 2
The Tehran Stock Exchange ended the month of November with a 0.5% fall by its main index
leading to a year to date performance of -9%. The continued rout in the global commodities and
oil markets were contributing factors towards the negative atmosphere in the market this month.
On the upside, trading volumes reached $643 million in November showing a 32% increase
in comparison to the past month. With an increase of 2.8%, Pharmaceuticals were the best
performing group in terms of market cap amongst the 10 largest industries. This jump can be
traced back to optimism towards the removal of sanctions which may potentially lead to lower
transaction costs and eventual better outlook for trade.

"The emirate of Sharjah is planning to raise funds through a dollar-denominated sukuk of benchmark size, sources aware of the matter said on Tuesday, in what could be the first sovereign sukuk issuance from the region this year.

Six local and international banks have been mandated for the sukuk including HSBC, which is leading the transaction, two of the sources said, speaking on condition of anonymity as the information isn't public.

The sovereign is aiming to issue the Islamic bond in the first quarter of the year and could announce investor meetings for the deal as early as this month, the sources added. Benchmark size is traditionally understood to mean in excess of $500 million.

An official at Sharjah's department of finance declined to comment on the matter. (Editing by David French)"

“Oil had so far limited impact on the economy and that major infrastructure projects in Abu Dhabi and Dubai will continue,” Al Mansouri told reporters on the sidelines of the Federal National Council’s session.

Al Mansouri said a diversification policy under which the country’s dependence on oil steadily decreases year after year had helped the UAE neutralise the oil price decline."

"Most Gulf stock markets remained weak on Tuesday because of concern about volatile oil prices and the outlook for the global economy, while Egypt rallied on the back of buying by foreign investors.

The Saudi index climbed in the opening minutes but soon turned lower and closed down 0.7 percent. Major food producer Savola plunged 9.7 percent after Saudi Arabia said it would cut off all commercial relations with Iran in its dispute with Tehran over Riyadh's execution of a Shi'ite cleric.

Savola is one of the few Saudi companies with a presence in Iran; through an affiliate it has edible oil and confectionery factories in Tehran, which provided 11 percent of its total revenue in the third quarter of 2015."

"Saudi Arabia's stock index edged down in the first hour of trade on Tuesday while Egypt's rose in thin volumes.

The Saudi benchmark climbed in the opening minutes but then turned lower, losing 0.4 percent. Food producer Savola plunged 8.9 percent after Saudi Arabia said it would cut off all commercial relations with Iran in its row following Riyadh's execution of a Shi'ite cleric in the kingdom.

Savola is one of the few Saudi companies with a presence in Iran, with edible oil and confectionary factories in Tehran. It has not yet released a statement on the impact on its business of geopolitical tensions, and analysts said there would not necessarily be a big impact.

"Since Saudi Arabia’s execution of Sheikh Nimr al-Nimr, a prominent Shia cleric, tensions between the Middle East’s two main powers has reached boiling point, with dangerous repercussions for the whole Middle East.
The execution can be seen as part of Saudi Arabia’s more assertive attempts to stand up to Iran, which Riyadh accuses of meddling in Arab affairs and undermining its authority. These are the principal flashpoints in the region."

"Oil prices swung violently on the first trading day of 2016 as traders weighed weak economic data from China and worsening relations between Saudi Arabia and Iran, the biggest rivals in the Opec cartel.
A rollercoaster session began with higher prices after Riyadh cut diplomatic ties with Iran in response to protests in Tehran targeting the Saudi embassy over the execution of a prominent Shia cleric.
But they moved lower after Chinese shares plunged in response to news that China’s manufacturing sector shrank for a fifth consecutive month in December."

"At almost any other time, an escalating diplomatic conflict between Opec members Iran and Saudi Arabia would mean a spike in oil prices.

That the rally this time could not be sustained shows just how abnormal things are in the oil market. Brent crude erased an initial gain of more than 4 per cent on Monday as a global supply glut and the slowest Chinese growth in a generation trumped mounting strife between the nations on either side of the world’s busiest waterway for oil tankers.

“When oil supplies were tight, we’ve seen bigger reactions to geopolitical tensions,” said Tushar Tarun Bansal, a senior oil analyst in Singapore at industry consultant FGE. “Now the price rise has actually been quite muted because the world is in a surplus situation.”"

"Most Gulf stock markets were soft in early trade on Tuesday as global bourses remained subdued and some local retail investors continued to cash out.

Dubai's index was down 0.2 percent after an hour of trade, after a 1.6 percent decline on Monday. Air Arabia fell 2.2 percent, on concern that the carrier's business could suffer as Saudi Arabia cut flights and commercial links with Iran.

Concern about the pace of global economic growth is a bigger factor than geopolitical tensions for the markets. Dubai blue chip Emaar Properties fell 0.7 percent, heading for its fifth straight session of declines.

"For all the meltdown in relations between Iran and Saudi Arabia, the two Middle East countries have got something in common -- at least in terms of markets.This time last year, Saudi authorities promised to open the country's stock market to an anticipated wave of direct foreign investment. In 2016, it's Iran's turn -- if sanctions are lifted soon, then a tide of foreign money could flood in.But that's where the similarity ends. The Saudi market's opening has been a short-term flop thanks mostly to the slump in the price of oil. The Tadawul All Share Index slumped 17 percent last year -- a miserable run that coincides with the move to let foreigners put money directly into shares, which took effect in June. "

"It’s about to get a lot more expensive for Gulf region borrowers to fill the holes in their budgets caused by slumping oil prices.
Issuers in the six-nation Gulf Cooperation Council, including the governments of Saudi Arabia and Qatar, will probably find themselves paying 50 to 100 basis points more than current yields to sell bonds on global markets in 2016, according to Mashreq Capital DIFC Ltd., which manages the Middle East’s best-performing Islamic fixed-income fund. Oil’s 35 percent drop last year pushed yields to the highestin more than four years.
Saudi Arabia
The biggest Arab economy, for which oil income accounts for three quarters of government revenue, last month forecast a 14 percent cut in state spending in 2016 and said it will bridge its $87 billion budget deficit by selling local and foreign currency bonds.